I’ve decided to stop posting to the Energy Investment Strategies web site and to take the site down eventually.  There are two reasons.   One is that I need to concentrate my efforts on fighting my cancer.  The other is that I think to a large extent my original aims for this site have been accomplished.  The site was started to educate investors about “peak oil”, its implications for potential future energy shortages, related increases in the importance and value of energy-related equities, and ways investors can best participate .  …

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The stock market and the oil market both seem to engender feelings much like summer vacation time when I was a kid.  Kinda boring, not much happening, a time to wander around, allow your attention dwell on whatever news of the day happens to come along and rest your mind before getting back to the “real world” some time around Labor Day.   So we can be distracted by Gov. Sanford’s bazaar behavior, the political drama of health care reform, Berlesconi and his babes, or Wimbledon - all of which are …

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As numerous observers have said of late, the causes of oil’s substantial climb from about $40 to $70 were primarily the weakening dollar and purchases by investors and speculators (if there is a difference) to hedge their inflation fears.  I’ve noted these causes ever since oil broke $50. More recently I offered the view that some fundamental supply and demand pressures may be building on U.S. oil inventory levels due to the combined difficulties of four of America’s five largest suppliers, Mexico, Venezuela, Nigeria, and Canada, to …

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Venezuela has provided about 11% of U.S. oil imports, roughly 1.2 mb/d.   Two trends are putting that supply at risk.  The first is Venezuela’s increased commitment to sell its oil to Cuba, to China, and to other non-Japanese Asian countries.  This commitment may be partially one of political comradeship, but it also is based on Venezuelan debt to certain Asian countries. The second is the decline in Venezuelan production that has come from the increasing financial chaos and expropriation activities caused by its virtual dictator, Huge Chavez.  I think …

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Ever since oil lifted over $50 I’ve been saying that speculation is the cause.   Actually, the lower dollar (caused by speculation) is a good part of the cause and inflation speculation is the rest.   What is not driving oil up, it seems, is actual supply and demand.  That’s the assumption in the market, anyway, and it’s probably correct. But there are some fundamentals influencing oil to the upside that are worth noting.   One is Nigeria and the other is Venezuela.   Both have collapsing governments and economies that have been well …

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Oil prices are ascending in concert with a rising stock market and an expanding sense of non-pessimism about the global economy, yet the supply of cheap oil remains far greater than demand.   Huge amounts of $5 cost oil is being moth-balled by OPEC and there is no shortage of oil inventory above ground, much of it floating at sea.   So the fundamentals of near term oil supply and demand imply lower prices but they are being overpowered by speculators who want to own oil as an investment category.  There …

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Stocks continue to recover from their panic bottoms of last November, many of them having doubled or more from then (case in point: General Electric).   All this seems very healthy to me given the lack of real world data indicating any sort of resumption in economic growth.  We get only data indicating a slowing in the rate of decline.  On top of that, we know there are more shocks to come:  huge default rates in loans on commercial real estate which lags the economy, the likely bankruptcy of both Chrysler …

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Oil and Stocks Advance Further   Oil and stocks seem to have bottomed as I suggested last month.  Since that March 16th post, stocks are up another 8%, a scorchingly hot run on an annualized basis.  Since March 6th the S&P is up over 21%.   Meanwhile the price of oil has risen almost 35% since February 18th, not quite two months ago. More Gains to Come I continue to expect further gains for both stocks and oil - and eventually for natural gas - but each is a different …

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Are stocks and oil bottoming?

Was last Tuesday’s 350-point rally the beginning of the end of the bear market or just a false “bear trap?”  And a related question: “Did oil bottom at $33 and will it get re-tested?”  Let’s see what we know.

Some things we know

Sometimes the objective observable facts can yield fairly clear conclusions.  Usually that’s not the case.  Usually you can use the available facts to make a decent argument in either direction.  But sometimes the facts seem fairly clear.

For example, there should have been clarity about being …

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Economists who adhere to Milton Friedman’s concepts say that inflation keys off the money supply, although the number-keepers define inflation in terms of the prices of goods and services.  So pervasive is the Friedman idea that lots of people now say the dollar will sink and inflation will reign because the government has been “printing” so much money and is planning to “print” even more - they equate the huge Federal deficits with an increase in the money supply.  (I put “print” in quotes because most of the money is …

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Our current investment trauma marks the end of an era of excesses in credit and real estate markets, of course.  But it also denotes that the United States is undergoing a far more general and significant transition - not only to a new government with a radically different agenda, but more lastingly into a whole new climate for investments. 

Gone is the era of wind-to-the-back investing powered since 1982 by continually lower interest rates and the virtuous influence of the baby boomer demographic bulge working its way through the U.S. economy …

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Some companies are cutting compensation levels and hours rather than cutting employment.  For example, here is a report on Visteon, the car parts supplier, that is putting 2,050 employees on a 4-day week and cutting their wages by 20%.  If you Google  “wage cuts” you get 529,000 responses.

Cutting wages and/or hours is a more humane way to downsize than firing people outright, in my opinion.  But to the extent that wage and hour cuts has been and will continue to be a trend, it disguises the unemployment numbers.  So …

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The price of oil has been brought low by the collapsing global economy as we all know.  What next?  To see how far the economy may have to fall (and thus how long we can expect the oil price to be under pressure from reduced demand), let’s look at the bursting bubbles that are causing the economy to implode.  They include a bubble in housing construction and housing prices; a bubble in financing - both stocks and credit expansion; and a bubble in executive compensation. 

The first two bubbles have been …

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Here’s a phrase you might want to remember: necessity is the mother of invention.  Catchy, don’t you think?  What made me coin this phrase was watching last Sunday’s “60 Minutes” story about Saudi Aramco.  Among the many wonders of the guided tour hosted by the Saudi oil minister, Ali Al-Naimi, was a research lab where the Saudis are working to develop new ways to make oil into a cleaner burning and more efficient fuel.  Clearly the Saudis are concerned about the future of their primary export.  They see the …

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Energy investing - for me, at least - is mostly on hold.  I do have some mid-stream gas pipeline companies that pay great dividends but little else besides cash.  When will it be time to get back into energy stocks in a core portfolio sense?   Lets work back from the new fundamental realities of oil prices to their implications for energy stock prices.    Before 2003 (except during the politically related oil crises of the 1970’s) there was only one condition in the oil market: plenty of oil.  So oil …

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